5.LIQUIDITY MANAGEMENT

resubmit transaction, run out of processing capacity, failure in communication with third-party providers causing failed transactions and third-party application failures (software, hardware, power), etc.

DFS providers shall ensure seamless transaction processing with proper authorization, reconciliation and 24/7 availability. DFS providers shall actively track the percentage of customers who have experienced downtime while using DFS and frequency and timings of technology downtime.

DFS providers should ensure consumer data is secure and protected and not shared with third-parties without customer’s consent. DFS providers shall guarantee regulatory compliance by ensuring safe data transfer and setting fraud alerts on their technology platform to safeguard agents and customers. Providers shall ensure proper auditability of the agent transactions by the Regulator.

DFS providers shall identify the technological challenges and risks faced by agents in rural areas as they face different challenges as compared to their urban counterparts and have in place strategies to manage those challenges.

> The Financial Institutions (Agent Banking)

regulations, 2017, issued by Central Bank of

Uganda require that all information or data the agent collects in relation to agent banking is property of the financial institution and subject to data protection requirements.

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> Guideline on agent banking issued by Central

Bank of Kenya suggests that the provider shall ensure that it has proper security control policies to safeguard the information, communication and technology systems and data from both internal and external threats. It also suggests that all transactions involving deposit, withdrawal, payment or transfer of cash from or to an account shall be real time.

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> In Côte d’Ivoire, the e-money instruction limits

issuers’ partnership arrangements. Issuers may enter such agreements only with technical operators who restrict their activities to the

“technical treatment” of e-money (and who are not responsible for issuing e-money).

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Agent liquidity management plays a critical role in ensuring that customers receive high-quality services from agents. It involves ensuring that agents have enough balance in their e/mwallets and also enough cash with them to be able to provide services to customers as and when demanded. Improper liquidity management can lead to service denials by the agents and lack of agent motivation leading to customer’s lack of trust in agent networks.

GUIDANCE FOR THE REGULATORY AUTHORITIES

Regulatory authorities shall guide the DFS providers to have effective liquidity tracking models by enhancing their Management Information System (MIS) capabilities to ensure uninterrupted service delivery. Centralized monitoring systems can help the DFS provider to identify agents whose liquidity levels are low and alerts can then be sent to respective agents to encourage them to rebalance.

Regulators shall encourage DFS providers to use data analytics to monitor agent transactions closely and predict liquidity management needs, based on historical data and trends. Data analytics can also be used to identify regions with higher transaction volumes and make intelligent predictions that can be used by ANMs and agents to be prepared as per the liquidity requirements.

Regulators shall explore the possibility of making loans or overdraft facilities available through government bodies or private sector to the agents to facilitate liquidity management. Such initiatives can help in exponential growth of financial inclusion initiatives by the governments and Regulators. Regulators can also facilitate collaboration with postal department and other government/quasi government organisations that can provide liquidity balancing facility to the DFS providers. This can be highly relevant for the G2P programs.

Regulators shall encourage the DFS providers to create digital ecosystems consisting of open APIs, interoperable platforms to encourage development of more use cases for the agents and customers to use their money within the system. This will reduce liquidity pressure on the agent network as customers can use digital payments to avail other products and services.

REGULATOR’S GUIDANCE FOR DFS PROVIDERS

DFS providers shall aspire to have the capability to track real-time liquidity situation of the entire agent network to ensure that the agents have adequate liquidity at all times to serve their customers. For example, many mobile money and agency banking deployments use technology that allows them to track the exact liquidity level for their agents across the country from a central location. This helps in reaching out to agents with less liquidity and supporting them to rebalance.

DFS providers shall provide multiple options for agents to rebalance their liquidity to ensure effective liquidity management and explore using the super agents for managing cash and e-money levels as prescribed in the regulations. Options can include rebalancing at ATMs, through inter-agent transfers, where agents are allowed to receive e-float from other agents in the network. Agents can also use options such as internet banking and mobile banking to transfer money from their personal account into the float account.

DFS providers shall ensure regular visits to agent outlets by authorized sales representatives, to guide and support the agent on liquidity management practices.

DFS providers shall track and report percentage of customers who have faced e-money or cash outage at agent locations and the number of transactions denied because of lack of cash or e/m-money. This reporting shall be disaggregated by gender.

DFS providers shall consider the possibility of lending to their agents on their own or having a partnership with other lenders who are interested to extend credit to manage liquidity requirements based on data analytics of agent’s past performance. This can be significant for the agent to manage liquidity.11

DFS provider shall make efforts to establish super agents, such as microfinance institutions, cooperatives, fuel stations and supermarkets, etc. Such super agents can provide rebalancing points where agents can exchange excess e-float for cash and vice-versa. This can play an important role in liquidity management.

> Payment Agent Network Regulations, 2017 issued

by Bank Al Maghrib allows the use of principal payment agents, who are authorized to offer all types of payment services and also support other retail agents on behalf of the DFS provider. These principal payment agents manage the liquidity of a group of retail agents especially for those located in rural areas.

> Safaricom in Kenya offers some of their selected agents with short-term financing to meet their liquidity requirements.

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> Tigo Pesa in Tanzania allows nearby agents to offer float to each other rather than requiring their agents to physically visit a bank branch or their distributor every time they need to rebalance. This provides a lot of convenience for the agents and also some extra earnings for the agents helping their fellow agents.